WAGE & HOUR CLAIMS,
CONCERNS & CLASS ACTIONS
IN CALIFORNIA
Managing Employees With Success
June 2011
Presented by
Al Landegger & Michael S. Lavenant
LANDEGGER | BARON | LAVENANT | INGBER
Advice - Solutions - Litigation
TOP THREE WAGE AND HOUR CLAIMS
YOU SHOULD EXPECT TO BE SUED FOR
AND HOW TO AVOID CLAIMS
1. Overtime
 Misclassification
 Unpaid Overtime
 Off The Clock Work
2. Meal & Rest Periods
3. Unreimbursed Expenses
TOP THREE WAGE AND HOUR CLAIMS
YOU SHOULD EXPECT TO BE SUED FOR
AND HOW TO AVOID LITIGATION
 Topics to be covered
 Wage & Hour Class Actions
 Reasons class actions for wage and hour claims are
increasing
 Significant decisions
 Unique issues for wage and hour claims
 Preventative advice and strategic litigation issues
 Misclassification
 Standard Exemptions
 Off the Clock Work
 Donning & Donning
 Preliminary & Postliminary
 Automatic deductions
 Meal & Rest Periods
 Unreimbursed Expenses
Explosion of Wage & Hour
Class Actions
 Reasons for Increase:
 Eight-Hour-Day Restoration and
Workplace Flexibility Act of 1999
 Private Attorney General Act of 2004
 Class Action Fairness Act of 2005
 Revised FLSA Regulations
 Key Court Decisions
 Attractive Court Verdicts/Settlements
Appellate Court Decisions
 Cortez v. Purolator Air Filtration Products
(2000) 23 Cal.4th 163 [4 Year SOL]
 Bell v. Farmers Insurance Exchange
(2001) 87 Cal.App.4th 805 [Production/Administrative
Dichotomy]
 IBP v. Alvarez
(2005) 546 US 21 [Donning & Doffing]
 Murphy v. Kenneth Cole Productions
(2007) 40 Cal.4th 1094 [Labor Code 226.7
Wage/Penalty]
Appellate Court Decisions
 White v. Starbucks
(2007) 497 F.Supp.2d 1080 [Permit and authorize
meal periods]
 Brinker Restaurants v. Superior Court
(2008) [State court recognizes flexibility in meal
and rest periods as well as employee time keeping
requirements]
 Gattuso v. Harte-Hanks Shoppers
(2007) 42 Cal.4th 554 [Alternative methods of
expense reimbursement approved]
 Schachter v. Citigroup
(2009) 47 Cal.4th 610[Economic realities of
compensation agreement controls]
Unique Issues In
Wage & Hour Claims
 Burden is on employer to establish exemptions
and record hours worked
 Employer must also force employees to take
unwanted meal periods
 Vast difference between FLSA and California Labor
Code
 Confusing laws and Labor Commissioner
interpretations
 Technical violations create liability
 Most laws provide for recovery of attorneys’ fees
to employees, not employers
Example of Exposure
 Labor Code Section 226 requires 9 items:
 Gross wages
 Total hours worked
 Piece rate and number of units
 All deductions
 Net wages
 Pay period
 Name of employee and EIN or last 4 digits of
SSN
 Name and address of employer
 All hourly rates and hours worked for each rate
 Missing any one above can result in penalties
[$50/$100/$4000]
Overtime Rules
• Preliminary Considerations:
– “Workday” and “Workweek”
– “Workday” is defined as “any
consecutive 24-hour period commencing
at the same time each calendar day.”
– A “workweek” is “any 7 consecutive
days, starting with the same calendar
day each week.” A “workweek” is a
“fixed and regularly recurring period of
168 hours, 7 consecutive 24-hour
periods.”
Overtime Rules
• Preliminary Considerations:
– “Shift” is defined as “designated hours of work
by an employee, with a designated beginning
time and quitting time.” This has ramifications,
particularly with respect to alternative
workweeks.
– Once the workweek is established, it cannot be
changed unless the change is intended to be
permanent and not designed to evade overtime
requirements. Each workweek stands alone,
and simply having a 2-week pay period does
not allow the employer to average the 2 weeks’
hours.
Overtime Rules
• Generally, premium pay to non-exempt
employees in California is required in five
different situations:
– Over 8 hours of work in a work day (time and
one-half)
– Over 40 hours of work in a workweek (also
consistent with federal law) (time and onehalf)
Overtime Rules
• Cont.
– The first 8 hours of work on the 7th consecutive
day of work in a workweek (time and one-half)
(note that the employee must work all 7 days
in the workweek: merely working 7
consecutive days, if the days cross over into
another workweek, will not qualify the
employee for the 7th day premium)
– Over 12 hours of work in a work day (double
time)
– Over 8 hours of work on a 7th consecutive day
in a workweek (double time) (private
employers only)
Overtime Rules
• Cont.
– Federal law only has a 40-hour week.
– “Anti-pyramiding” rules provide that employers
need not combine more than one rate of
overtime compensation (example: employee
works 42 hours in a week, including 10 hours
on one day). The 41st and 42nd hour must be
compensated, but they will be deemed
equivalent to the 9th and 10th hour on the one
day of overtime worked, so only one set of
overtime need be paid.
Overtime Rules
• Limited Exceptions for Overtime:
– Alternative Workweek Schedules
• Employees may be allowed a set schedule or menu of
options that would allow employees to work up to 10
hours in a day (no more than 40 hours in a
workweek) without the payment of overtime.
– Make-up Time provisions
• Employee is allowed to work up to 11 hours in a day
without overtime payment if they are “making up”
time they lost in the SAME WORKWEEK due to
personal circumstances.
• Employee must make the request – Employer is not
permitted to coerce or intimidate employees in their
decision.
• Employers are permitted to have a policy and form.
Which Wage Order?
• Which Wage Order Applies - IWC Classifications
– Industry vs. Occupational Wage Order
– Industry Wage Order - Wage Order 1-3, 5-13
are “industry” wage orders.
• These wage orders cover ALL employees of
companies that conduct business within a
particular industry - even office or
administrative staff.
• If the business is comprised of several
industries, more than one wage order may
be applicable to the different portions of the
integrated business.
Which Wage Order?
• Which Wage Order Applies - IWC Classifications
– If a business is not covered by a particular “industry” as
defined in the wage order, then an occupational order
may apply.
– Occupation Wage Order - Wage Order 4, 14-17 are
occupational wage orders.
• These wage orders cover only particular jobs.
• Wage Order 16 and 17 are new to California and
cover industry that previously may have been
exempted from the wage orders.
• Businesses that are not subject to an “industry” wage
order may be covered by more than one occupational
wage order.
Employee Misclassification
• There are only three major overtime exemptions
in California.
– Executive
– Administrative
– Professional
• These are similar BUT DIFFERENT under federal
law.
• Employer must comply with the one that provides
the most protection for the employee.
• The job description is helpful, but only the start of
the analysis.
Employee Misclassification
• These three exemptions are similar
BUT DIFFERENT under federal law.
• Employer must comply with the one
that provides the most protection for
the employee.
• The job description is helpful, but
only the start of the analysis.
Employee Misclassification
• Executive Exemption:
– Salary Test:
• Must earn salary minimum of $33,280.
• Employee is paid for QUALITY of work not
QUANTITY of work.
– Duties Test:
• Supervise 2 or more employees.
• Exercise discretion and independent
judgment in management.
• Must be engaged in these activities more
than 50% of their time.
Employee Misclassification
• Administrative Exemption:
– Salary Test:
• Must earn salary minimum of $33,280.
• Employee is paid for QUALITY of work not
QUANTITY of work.
– Duties Test:
• Provide direction on the operations of the
enterprise – not the service or sale of goods.
• Exercise discretion and independent
judgment.
• Must be engaged in these activities more
than 50% of their time.
Employee Misclassification
• Professional Exemption:
– Salary Test:
• Must earn salary minimum of $33,280.
• Employee is paid for QUALITY of work not
QUANTITY of work.
– Duties Test:
• Must be licensed in one of the enumerated
professions recognized by the State of
California.
• Exercise discretion and independent
judgment.
• Must be engaged in these activities more
than 50% of their time.
Employee Misclassification
• Salesperson Exemption:
– Outside Sales:
• Employee is completely exempt from
overtime.
• Employee is also exempt from meal and rest
periods.
• Employee must spend more than one-half of
their time outside of office.
Employee Misclassification
• Salesperson Exemption:
– Inside Sales:
• Employee may be exempt from overtime.
• Must earn at least one and one-half times
the minimum wage for all hours worked and
more than half of that employee’s
compensation represents commissions.
• Still subject to all other protections – meal
and rest breaks.
Employee Misclassification
• Special Rules for Out of State Employees:
– Sullivan v. Oracle Corp.:
• California Supreme Court is reviewing issue of whether
non-exempt employee that is based outside of California
but performs work in California is entitled to overtime
pursuant to California law or the federal Fair Labor
Standards Act which does not:
– Require premium unless the employee works more than
40 hours in a week
– Require meal or rest periods
• May also have an impact on “borderline” FLSA-exempt
employees who would be classified as non-exempt
employees in California.
Employee Timekeeping
• Off-The-Clock Work
– Employer’s obligation to record all time
worked.
– Employee should be directed not to perform
work that is not accounted for in the timecard.
– Employee should sign timecard, acknowledging
true and accurate recordkeeping.
– Travel Time
– Training, meetings, lectures, conferences.
– NOTE: Employee can have different rates for
different type of work – such as travel time at
minimum wage.
Employee Timekeeping
• Unauthorized Overtime
– Employees who work unauthorized
overtime MUST be paid premium pay,
but can be disciplined.
Preliminary & Postliminary
 Donning and doffing
 Preparing equipment
 Security screening
Donning & Doffing
• Conflicting authority as to whether
donning/doffing “protected gear” is a principal
activity.
• DOL--if the employer requires donning and
doffing of protective gear at the employer’s
premises then it is a principal activity.
• …whether required gear is ‘unique’ or ‘nonunique’ is irrelevant to the principal activity
analysis.
Donning & Doffing
• Ninth Circuit: “This ‘integral and indispensable’ conclusion
extends to donning, doffing and cleaning of non-unique
gear (e.g., hardhats) and unique gear (e.g., Kevlar gloves)
alike.”
• Tenth Circuit: donning and doffing safety glasses, earplugs,
hard hat, and safety shoes, “although essential to the job,
and required by the employer,” were non-compensable preand postliminary activities.
• Second Circuit: “[t]he donning and doffing of generic
protective gear is not rendered integral by being required
by the employer or by government regulations…nuclear
power plant employees need not be paid for time spent
donning and doffing a helmet, safety glasses, and safety
boots before and after their work shifts.
Preparing Equipment
• Truck drivers entitled to compensation for such
pre-trip activities as loading their trucks and
conducting a pre-trip inspection of their vehicles.
• Employees who use service vehicles may also be
entitled to compensation for time spent loading
and unloading the vehicle, fueling, and cleaning
the vehicle where such tasks are necessary part
of the job.
• Note – New 9th Circuit decision in Rutti v. Lojack
concerns at-home preparation and use of
company vehicles.
Security Screening
• Security screening activities may be necessary or
“indispensable,” BUT they are not necessarily
“integral” to the principal work and thus not
compensable.
• Construction workers need not be paid for time
spent passing through airport security because
such a security regime was required by law and
did not benefit the employer.
Automatic Deductions
• If the employee only clocks in at the start of the
shift and clocks out at the end, the employer may
be liable for unpaid wages if deduction was made
by employer for break but break was never taken,
or taken in the full amount.
• Some employers automatically deduct from
employees’ wages an amount for a noncompensable break or meal period.
• California law and the FLSA requires that
employees be compensated for all time worked.
Employee Breaks
• Meal Periods:
– Employee must receive 30-minute, duty-free
meal period if they work more than 5 hours in a
workday.
– Period may be waived by mutual consent if the
employee works 6 hours or less.
– Absent exigent circumstances, period can not
be waived if employee works more than 6
hours.
– Employer should permit and authorize
employee to take meal period.
– Meal period starting and stopping times should
be documented.
Employee Breaks
• Meal Periods:
– Employee who works 5 hours or less is not required to
have a meal period.
– Until the California Supreme Court decides the Brinker
Restaurants decision, the requisite meal period should
not be taken at a time when the employee will work
more than 5 hours after returning from the first meal
period without taking a second meal period.
– A second meal period is required if an employee works
more than 10 hours.
– If more than 10, but less than 12, second meal period
can be waived by written agreement if the first meal
period was taken.
Employee Breaks
• Rest Periods:
– Employee must receive 10-minute, dutyfree rest period for every 4 hours of
work, or major fraction thereof.
– Employer should permit and authorize
employee to take rest period.
– Rest periods and meal period cannot be
pooled.
– Rest period starting and stopping times
do not have to be documented.
Employee Expenses
• Labor Code Section 2802:
– Provides that all expenses necessarily
incurred by the employee in discharge of
their duties to the employer must be
reimbursed.
• Use of Personal Automobile – Reimburse IRS
rate.
• Cell phone.
• Personal computer or office equipment.
• Uniforms.
• Meals and Entertainment.
Preventative Solutions
 Conduct internal audit to determine areas of
potential exposure
 Review job descriptions/classifications
 Follow record keeping requirements
 Review payroll practices
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Prepare & Regularly Review Employee Handbook
Review and understand applicable wage orders
Train HR personnel
Enforce meal/rest period policies
Preventative Solutions
 Develop timekeeping procedures
 Develop reimbursement policies
 Uniforms
 Mileage
 Tools & Equipment
 Consider varying evaluations, job descriptions,
standards, rules and procedures by location or
individuals
 Communicate legal requirements to employees
Use of Experts
• Several types of professionals can assist in the
avoidance or defense of these claims:
– Current management personnel
– Timekeeping and Payroll companies
– Legal counsel
– Financial advisors
– CPAs/Accountants
– Other labor consultants or experts
Use of Experts
• Current Personnel
– Management level employees have
unique knowledge concerning the
application of company policies to dayto-day operations.
– Supervisory employees are aware of the
existence of information relevant to the
claims.
– Employees may have unique knowledge
to impeach claimants.
Use of Experts
• Timekeeping and Payroll Companies
– May provide guidance on overtime
issues;
– May provide assistance on meal and rest
period penalties; or
– May assume liability for errors.
Use of Experts
• Legal Counsel
– Competent employment law counsel should be
engaged from the beginning.
– Key in providing necessary detection and
avoidance training to HR, management and
other supervisory personnel.
– Prompt evaluation of claims will assist
company in making an informed decision.
– Issues of jurisdiction, forum, venue, or
pleadings present at the outset of the case may
impact outcome.
Use of Experts
• CPAs/Accountants/Financial Advisors
– Accountants may have records concerning
payroll.
– Assist in defending against claims that
expenses were properly reimbursed.
– Have ability to conduct exposure analysis.
– Interpret financial stability of company to play
a part in negotiated or court-approved
settlement.
– Financial Advisors provide benefit programs
that create satisfied employees.
Use of Experts
• HR/Labor Consultants
– Can provide input as to the exempt status of
employees named in claim.
– Can determine if meal and rest periods are
being followed.
– Analyze whether all required expenses are
being reimbursed properly.
• Information Technology
– Forensic experts can assist in locating
documents vital to a defense even if it has
been deleted.
– Forensic experts can also play a role in meeting
the obligation to preserve all electronic
evidence and search for relevant data.
Q&A
Questions?
For more information contact:
Alfred J. Landegger, Esq.
Alfred@Landeggeresq.com
Michael S. Lavenant, Esq.
Michael@Landeggeresq.com
LANDEGGER BARON LAVENANT & INGBER
15760 Ventura Blvd., Suite 1200
Encino, California 91436
751 Daily Drive, Suite 325
Camarillo, California 93010
Los Angeles Office: 818.986.7561
Ventura County Office: 805.987.7128